Industrial Policy and Manufacturing

Gordon Birtwistle Excerpts

Thursday 22nd November 2012 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I beg to move,

That this House has considered the matter of industrial policy and UK manufacturing industries.

I thank the Backbench Business Committee for allocating time for today’s debate.

A debate on industrial policy, particularly with regard to manufacturing, is overdue. It is also extremely timely, given the recent publication of Lord Heseltine’s review, “No stone unturned in pursuit of growth” and a number of recent developments, including Ford’s announcement of the closure of its plants in Southampton and Dagenham, and what we saw earlier in the year with the Coryton oil refinery. It is also an opportunity to highlight some of the excellent work being undertaken by the all-party associate manufacturing group, of which I am an officer, along with the hon. Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle), my hon. Friend the Member for Huddersfield (Mr Sheerman) and several others. I know they will all make contributions today.

I believe that the UK has an incredibly important manufacturing sector—one that has huge potential, but one that needs a successful industrial strategy that would contain a number of elements and could carry widespread support across this House. One factor common to countries that have successful industrial polices is that the fundamentals of the strategies are widely shared. Businesses can invest for the long term, knowing that the rug will not be pulled from under them. Lord Heseltine makes that point on page 8 of his report, when he asks for the “maximum political consensus possible”. I would like the work of the all-party group, as well debates such as this, to become the basis of precisely that.

Let me say at the outset what a debate about industrial policy is not. It is not misty-eyed romanticism for a return to the 1970s. This is forward looking, not backward looking. I believe there is a case for a modern industrial strategy that allows for our manufacturing sector to be a driver of prosperity for many years ahead. When people from across the political spectrum, such as Lord Mandelson and Lord Heseltine, seem to be coming to a consensus behind this, too, there definitely appears to be some momentum building for it.

One part of Lord Heseltine’s report jumped out at me—not the lovely picture of Manchester town hall on the back cover, welcome though that is in any Government report, but paragraph 10 on page 5, where Lord Heseltine says:

“Whether we look at the well established mature economies such as the United States or the new thrusters of the BRICs, there is one clear message we overlook at our peril: the public and private sectors are interdependent. Only by working together and learning to understand each others’ strengths and capabilities will we succeed.”

I firmly agree, and I want to mention a number of areas where our industrial strategy should reflect that—in skills, investment, procurement and the image of manufacturing as well employer-employee relations.

The battle to attract and retain a skilled work force is a constant issue for industry. All major economies face it, and there is no magic bullet. However, the age profile of our skilled work force in the UK, which creeps ever upwards, should be of huge concern to us all. Every company I visit tells me that the skills pipeline does not work as it should. I believe we should be looking at two things here. First, we should be looking at ways to devolve skills funding more directly to business itself, and in exchange business should guarantee that they will provide the high-quality apprenticeships we all want to see.

[Gordon Birtwistle (Burnley) (LD)]

Does the hon. Gentleman agree that one of the biggest problems is the careers advice offered to young people in schools from the age of 12 onwards? The careers advice is normally given by teachers who have only ever been teachers and have no concept of industry outside school. Would it not be better if we had dedicated and qualified careers advisers in every secondary school in the country?

[Jonathan Reynolds]

The hon. Gentleman makes some good points. Careers advice is variable. As I understand it, we are moving away from face-to-face interactions and more towards website-based and telephone-based careers advice services. Whether that will have the effect we would want is probably a matter of concern to us all.

We need to make apprenticeships work for the long term. I know Government Members are always well armed with statistics on new apprenticeships, but I would say to the Minister that there is a quantity versus quality debate to be addressed here, and an issue to do with how many apprenticeships are effectively developing the skills of our next generation. This is an area where more needs to happen.

When I visit manufacturing businesses in my constituency, I am always struck by just how many skilled people started off at British Aerospace. Whether we meant it or not, it seems to me that in the past British Aerospace acted to all intents and purposes as an active industrial intervention, but with that role diminishing we do not have anything that really fills the gap.

As for investment, I am sure that nearly every Member in the Chamber could report the same conversation with local businesses about the banks’ lack of interest in what they do. Businesses say that funding halved overnight during the financial crisis, but that it was never that good beforehand. It seems that, as banks nationalised their business operations and their heads were turned by sectors of the economy that may have been more lucrative in the short term, they were no longer interested in the steady success of their manufacturing clients.

We must find a way of securing for our manufacturing businesses the investment that they need. It seems to me that there is a growing consensus on the need for a British investment bank, whether it is modelled on Germany’s KfW or on France’s Financial Stability Institute, and I am attracted by the idea of a regional or sectoral structure. The proposed green investment bank could form part of a wider strategic investment bank, with a remit to generate long-term returns based on investment in infrastructure and businesses across strategic sectors.

When it comes to procurement, I could simply use the word Bombardier, but there is plainly a view throughout industry that the United Kingdom’s current attitude to procurement represents a wasted opportunity for British business. Let me make it clear that I do not endorse protectionism. Some of the local firms in my constituency have been extremely successful in the export markets, particularly the aerospace businesses, and I think that talk of protectionism at home fails to recognise their achievements. A company delivering a contract here in the UK does not have to be British, but it should be possible to consider how we might be able to make procurement policy work for the UK economy in an intelligent way while still honouring our commitments to the single European market.

I was recently made aware of the problems of Manganese Bronze in Coventry, which could lead to the disappearance of iconic British cabs from the streets of London. The Mayor’s clean air strategy means that as many as 2,000 cabs may have to be replaced in December this year. With Manganese Bronze in administration, the market is now wide open for Mercedes vehicles manufactured in Germany. Surely there could have been a better way.

Another problem is the image of manufacturing. Modern manufacturing is clean and safe, but that does not seem to be widely understood. In fact, at a recent event held by the all-party group in Rochdale, some businesses reported struggling to convey the message that it was also well paid. I did not consider the problem to be particularly significant until I listened to the evidence that industry leaders gave to the group. If we are to try to increase the share of the economy that manufacturing represents, we will need to tackle that. I am not thinking of short-term rebranding or anything that smacks of a gimmick; I am thinking of a long-term campaign—similar to that requested by the hon. Member for Burnley—to get the message across to schools and make them understand what modern British industry is really like.

Finally, I want to say something about employer-employee relations and employment law in the UK. I have deliberately left that subject until the end of my speech, because I suspect that it is the one on which there will be the least consensus. Let me explain my view by giving an example from my constituency.

Kerry Foods, in Hyde, is the largest private sector employer in Tameside. It makes, among other things, Richmond and Walls sausages. Food manufacturing, incidentally, is a much undervalued part of British industry. A few years ago, Kerry needed to adopt the principles of lean manufacturing. It needed to be able to scale its production up and down much more quickly in order to remain competitive, and it therefore needed to consider moving from a five-days-a-week to a seven-days-a-week working pattern. That had big implications for the work force, who were strongly unionised, so Kerry decided to work with them and with Unite, the recognised trade union, to deliver it. In effect, Kerry told the union what it needed, and the union asked the work force to design a shift system that worked for them.

The staff knew that the company’s bottom line was staying profitable, and the company knew that there had to be something in it for the staff. They agreed on the new shift system and a 3.5% wage rise for two successive years, dropping to 2.5% in the third year. That is more than most of our constituents are getting at the moment. My constituents who work for the company have told me that they felt that the consultation process had been extremely sincere, inclusive and open to recommendations, and that input from the union had made it into the final proposals. Unite also sent its reps at Kerry Foods to “change at work” courses which would help them to understand the company’s objectives and deliver the agreement of the work force to the new system. I should add that the company pays for a full-time convenor at the site through facility time, in line with a great deal of best practice.

I gave that example in order to demonstrate that trade unions are not in themselves anti-competitive, and do not constitute a blockage to our economic prosperity. Given the right approach, they can make a very significant contribution to British industry. They should not be demonised. The Ford work forces in Dagenham and Southampton were given very little notification of the recent announcement, let alone a chance to serve as part of a solution to the problem. That was a missed opportunity.

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[Chris White (Warwick and Leamington) (Con)]

May I say how delighted I am to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) in this important debate? I must also thank the Backbench Business Committee for scheduling time for it. As co-chair of the all-party parliamentary group on manufacturing, along with the hon. Member for Huddersfield (Mr Sheerman), one of the most consistent messages I hear is that the UK needs to have a comprehensive industrial policy setting out the key economic objectives and the policies we need to achieve them. We need, as a country, to get back on a more sustainable path to growth, which means seeking to balance our books—specifically, by reducing our trade deficit—so that Britain can be more resilient against future shocks and thrives in a more competitive world. Any industrial policy needs to consider the full range of the UK’s economic strengths, from financial services to creative industries and renewable energy. However, the most effective way of achieving a more sustainable growth trajectory is to boost manufacturing and our industrial capacity.

[Gordon Birtwistle]

May I advise my hon. Friend that in 1997 manufacturing was responsible for 22% of our GDP and we had a £4.4 billion surplus on the balance of payments, whereas by 2008 that had reduced to 12% and we had a £42.6 billion deficit on the balance of payments? Does that not show that manufacturing and exports are vital to this country?

[Chris White]

I thank my hon. Friend for his intervention and I note the figures he uses. One target the Minister might like to consider in an industrial strategy is about 15% by 2015—that works in so many ways.

We cannot afford merely to dismiss a large part of our global economy. Emerging markets are focusing on production and industry already, but they will not focus on those things for ever. Soon they will seek to compete with the developing economies in highly lucrative services, as well as in research and development. Where will the UK go then? We need to compete in manufacturing, as well as in services and the creative economy, if we are to succeed in the years ahead. The narrower our economy becomes, the more unstable it will be. We need a broad-based economic strategy, and manufacturing can and must play a crucial role in delivering that.

--- Later in debate ---

[Gordon Birtwistle (Burnley) (LD)]

I congratulate my two colleagues—my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds)—on securing the debate. I also congratulate the new hon. Member for Corby (Andrew Sawford) on his maiden speech. I remember doing mine two and half years ago. I hope he is as enthusiastic in two and a half years as I am now. It does not take long for the House to kick the strength out of people.

The right hon. Member for Oldham West and Royton (Mr Meacher) put the debate into perspective when he said that, in the past 60 years, we have gone from being the major supplier to the world to being a minor supplier. In 1958—nearly 60 years ago—I turned up on my first day as an apprentice engineer at a company in Accrington that employed 5,000 people to produce textile machinery that was sold around the world. It is no longer there, and has not been for many years. I have been involved in manufacturing almost throughout the period he described.

We can get growth going in numerous ways. The one thing the Chancellor can do in two weeks’ time is give 100% capital allowances for investment in capital, buildings and the like for the manufacturing sector. As I understand it, the major companies in this country, and companies from abroad who wish to invest, have £70 billion stashed in banks. One hundred per cent. capital allowances for just two years would boost investment and the money would be spent in the UK.

Another major problem is the supply chain—it is a problem in the automotive and aerospace industries. It needs to be resolved. To get rid of our balance of payments deficit, we need to increase exports by 15% and reduce imports by 15%. It does not sound like a big task to export 15% more and import 15% less. I have asked companies whether they are able to do so. The vast majority in the aerospace industry say, “Yes, we can. We’ve got order books for 25 years ahead, but we do not have a supply chain to feed our order book, so we are having to import. We would really like to manufacture in the UK so we have our own supply chain.” We need to resolve that, but we also need the staff to work in the supply chain—the young people to work in the supply chains of our top industries, such as the aerospace, automotive and chemical industries, are not coming through. The supply chain gap is a major problem.

We have a major skills gap. I visited Rolls-Royce in Derby only last week and asked to see its apprenticeships training programme. I was delighted to hear that it takes on 40 extra apprentices every year not for Rolls-Royce, but for the supply chain—companies that supply Rolls-Royce but that cannot afford to take on apprentices. Those small companies want high-class apprentices and to deliver the skills of the future, and Rolls-Royce takes them on at its own expense so that its supply chain is secure.

Hon. Members mentioned careers advice. I am horrified when I go to schools in my constituency and hear about the careers advice that is given to young people. Basically, it is nothing—no careers advice that is of any use is given. Some young people would be interested in going into manufacturing, but nobody advises them what it is about. It is high time that the Department for Education looked into careers advice in schools. We need young people who really know what manufacturing is about.

Motion lapsed (Standing Order No. 9(3)).